AT&T; spins off NCR after years of frustration The breakup is completed

BLOOMBERG BUSINESS NEWSTHE BALTIMORE SUN

NEW YORK -- AT&T; Corp. closed a chapter in its history yesterday as it spun off NCR Corp. to shareholders, completing TC its breakup into separate telephone service, phone equipment and computer companies.

The $3.4 billion spinoff ends a frustrating experience for AT&T.; It bought NCR for $7.48 billion in 1991 and then failed to combine the companies' expertise in computers and communications. NCR's chronic losses dragged down AT&T;'s profits, and NCR's own value has fallen by half since 1991 -- even after AT&T; pumped $2.8 billion into the computer company.

With the NCR spinoff, which was effective at the close of trading yesterday, AT&T; completes the restructuring it began 15 months ago, when it said it would make NCR and its telecommunications equipment businesses separate, publicly traded companies. The equipment company was spun off in September as Lucent Technologies Inc. NCR is a leading maker of automated teller machines as well as of computers.

The pruning leaves AT&T; a $50 billion company focused on phone and credit card services. Now it faces the daunting task of increasing its core long-distance phone business, while simultaneously expanding -- profitably -- into new markets such as Internet access and local and wireless phone business.

The coming year "is going to be critical for AT&T; to position itself as an integrated service provider," said Frank Governali, an analyst at CS First Boston. "We need more evidence of their ability to move with more speed and nimbleness."

That could be tough. AT&T; is losing customers to small companies such as Excel Communications -- which aggressively markets its long-distance services through independent sales representatives -- and the growth in traffic, or minutes of long-distance time billed, on its network has slowed. AT&T; shares have fallen 6.1 percent this year, while the benchmark Dow Jones Industrial Average has risen 26 percent.

Moreover, AT&T; faces bigger challenges as it goes head-to- head against the deep-pocketed regional Bell companies, which are expected to enter the long-distance market in 1997.

"In AT&T;'s core business, there is a lot of improvement they need to target," Governali said. "AT&T; still has the best &r; combination of assets in the industry. But they really need to work on exploiting the value of those assets."

Analysts say AT&T; is behind its biggest rivals, MCI Communications Corp. and Sprint Corp., in offering one-stop service to consumers and businesses for phone, video and data transmission.

Analysts generally view AT&T;'s breakup as a success. Lucent shares soared after the company successfully boosted sales and profits by selling its equipment, such as sophisticated network switches, to AT&T;'s competitors, analysts said.

Under the largest initial public stock offering in U.S. history, Lucent sold 112 million shares at $27 each in April, netting AT&T; $3.025 billion. Since then, Lucent shares almost doubled to $53.125 Nov. 25. The shares closed down 50 cents at $46.25 yesterday.

Under the NCR spinoff, AT&T; shareholders will get one share of NCR for each 16 shares of AT&T; they own. Based on 1.62 billion AT&T; shares, NCR will have about 101.4 million shares outstanding. At its current stock price, NCR is valued at about $3.4 billion.

NCR shares, trading on a when-issued basis pending the spinoff, fell $1.75 yesterday to $33.375. AT&T; shares are expected to trade about $2 lower after the NCR spinoff. They fell 62.5 cents to $43.50.